[Federal Register Volume 61, Number 233 (Tuesday, December 3, 1996)]
[Notices]
[Pages 64183-64184]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30677]


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SECURITIES AND EXCHANGE COMMISSION
[Release 34-37983; File No. 600-23]


Self-Regulatory Organizations; Government Securities Clearing 
Corporation; Order Approving Application for Extension of Temporary 
Registration as a Clearing Agency

November 25, 1996.
    On October 7, 1996, the Government Securities Clearing Corporation 
(``GSCC'') filed with the Securities and Exchange Commission 
(``Commission'') a request pursuant to Section 19(a) of the Securities 
Exchange Act of 1934 (``Act'')\1\ that the Commission grant GSCC full 
registration as a clearing agency under Section 17A of the Act\2\ or in 
the alternative extend GSCC's temporary registration as a clearing 
agency until such time as the Commission is able to grant GSCC 
permanent registration.\3\ The Commission published notice of GSCC's 
request in the Federal Register on October 25, 1996.\4\ No comments 
were received. This order extends GSCC's

[[Page 64184]]

temporary registration as a clearing agency through May 31, 1997.\5\
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    \1\ 15 U.S.C. Sec. 78s(a) (1988).
    \2\ 15 U.S.C. Sec. 78q-1 (1988).
    \3\ Letter from Sal Ricca, President and Chief Operating 
Officer, GSCC, to Richard Lindsey, Director, Division of Market 
Regulation, Commission (October 2, 1996) (``Registration Letter'').
    \4\ Securities Exchange Act Release No. 37844 (October 21, 
1996), 61 FR 55341.
    \5\ On May 24, 1988, the Commission granted GSCC's initial 
application for registration as a clearing agency pursuant to 
Sections 17A and 19(a) of the Act and Rule 17Ab2-1 [17 CFR 
240.17Ab2-1 (1966)] thereunder for a period of three years. 
Securities Exchange Act Release No. 25740 (May 24, 1988), 53 FR 
19639. The Commission subsequently has extended GSCC's registration 
until November 30, Securities Exchange Act Release Nos. 29067 (April 
11, 1991), 56 FR 15652; 32385 (June 3, 1993), 58 FR 32405; 35787 
(May 31, 1995), 60 FR 30324; and 36508 (November 27, 1995), 60 FR 
61719.
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    GSCC provides clearance and settlement service for its members' 
transactions in government securities. GSCC offers its members services 
for next-day settling trades, forward settling trades, auction takedown 
activity, repurchase transactions, the multilateral netting of trades, 
the novation of netted trades, and daily marking-to-the-market. In 
connection with GSCC's clearance and settlement services, GSCC provides 
a centralized loss allocation procedure and maintains margin to offset 
netting and settlement risks.
    At the time of GSCC's initial temporary registration, the 
Commission granted GSCC an exemption from compliance with the fair 
representation requirements in Section 17A(b)(3)(C) of the Act.\6\ 
GSCC's current selection process for its board of directors permits any 
GSCC member to nominate candidates for election to the board and to 
vote for candidates so nominated. However, the shareholder agreement 
requires that six directors be dealer participants, three directors be 
broker participants, and three directors be clearing agent bank 
participants.\7\ As part of GSCC's request for full clearing agency 
registration, GSCC has requested that the Commission withdraw GSCC's 
exemption from the fair representation requirements.\8\
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    \6\ 15 U.S.C. Sec. 78q-1(b)(3)(C) (1988).
    \7\ In its order granting GSCC its initial temporary approval, 
the Commission stated that while the composition of GSCC's board of 
directors reasonably reflected GSCC's anticipated initial 
membership, the Commission believed that it would be appropriate to 
defer to a later date its determination of whether GSCC's process 
for selecting its board of directors assures participants fair 
representation. This decision was based on the fact that GSCC 
planned on expanding its services during the temporary registration 
period and on the uncertainty with regard to GSCC's future 
participant base.
    \8\ Registration Letter, supra note 3.
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    While GSCC states that it believes that its current selection 
process for its board of directors assures members fair representation, 
GSCC also states that it plans to modify the method of electing 
directors.\9\ Therefore, the Commission will defer its decision on 
whether GSCC meets the fair representation requirements until GSCC 
submits its new selection procedures and the Commission has had an 
opportunity to evaluate it. The Commission also believes that at this 
time GSCC's temporary registration as a clearing agency and GSCC's 
exemption from the fair representation standards of Section 
17A(b)(3)(C) should be continued.
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    \9\ Id.
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    It is therefore ordered that GSCC's temporary registration as a 
clearing agency (File No. 600-23) be and hereby is extended through May 
31, 1997, subject to the terms set forth above.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(50)(i) (1996).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-30677 Filed 12-2-96; 8:45 am]
BILLING CODE 8010-01-M